Contents Foreword Management report Corporate governance
A financial asset (or a portion thereof) is derecognised where:
The rights to the cash flows from the asset expire;
The rights to the cash flows from the asset and substantially
all the risks and rewards of ownership of the asset are
transferred;
A commitment has been made to transfer the cash flows
from the asset and a substantial portion of the risks and
rewards have been transferred; or
Not substantially all the risks and rewards are transferred but
where control over the asset is not retained.
A financial liability or a part thereof is derecognised if it ceases
to exist, i.e. after the contractual obligation has been fulfilled or
cancelled or has expired. Continuing involvement is recognised
if Rabobank neither retains nor transfers substantially all the risks
and rewards and control has retained. The asset is recognised to
the extent of Rabobanks continuing involvement in it.
Where a transaction does not meet these conditions for
derecognition, it is recognised as a loan for which security has
been provided. To the extent that the transfer of a financial
asset does not qualify for derecognition, Rabobank's contractual
rights are not separately recognised as derivatives if recognition
of these instruments and the transferred asset, or the
liability arising from the transfer, were to result in the double
recognition of the same rights and obligations.
Profits and losses on securitisations and sale transactions
depend partly on the carrying amounts of the assets
transferred. The carrying amounts of these assets are allocated
to the interests sold and retained using the relative fair values
of these interests on the date of sale. Any gains and losses
are recognised through profit and loss at the time of transfer.
The fair value of the interests sold and retained is determined
on the basis of listed market prices or as the present value of
the future expected cash flows based on pricing models that
involve a number of assumptions regarding, for Instance, credit
losses, discount rates, yield curves, payment frequency and
other factors.
2.10 Cash and balances at central banks
Cash equivalents are highly liquid short-term assets held to
meet current cash obligations rather than for investment or
other purposes. These assets have terms of less than 90 days
from inception. Cash equivalents are readily convertible to
known amounts of cash and are subject to insignificant risk of
changes in value.
Consolidated Financial Statements Company Financial Statements Pillar 3
2.11 Offsetting financial assets and liabilities
Where there is legal right to offset recognised amounts and it is
intended to settle the expected future cash flows on a net basis
or to realise the asset and settle the liability simultaneously,
financial assets and liabilities are offset and the net amount is
recognised in the statement of financial position. This relates
mainly to current accounts and derivatives. The offsetting of
taxes is addressed in Paragraph 2.24.
2.12 Foreign currency
Foreign entities
Transactions and balances included in the financial statements
of individual entities within Rabobank Group are reported in the
currency that best reflects the economic reality of the individual
entity's underlying operating environment (the functional
currency).
The consolidated financial statements are presented in
euros, which is the parent company's functional currency.
The statements of income and cash flows of foreign operations
are translated into Rabobank's presentation currency at the
exchange rates prevailing on the transaction dates, which
approximate the average exchange rates for the reporting
period, and the statements of financial position are translated
at the rates prevailing at the end of the reporting period.
Exchange differences arising on net investments in foreign
operations and on loans and other currency instruments
designated as hedges of these investments are recognised in
other comprehensive income. On sale of a foreign operation,
these translation differences are transferred to the statement of
income as part of the profit or loss on the sale.
Goodwill and fair value adjustments arising on the acquisition
of a foreign entity are recognised as the assets and liabilities of
the foreign entity, and are translated at the rate prevailing at the
end of the reporting period.
Foreign-currency transactions
Transactions in foreign currencies are translated into the
functional currency at the exchange rates prevailing on the
transaction dates. Differences arising on the settlement of
transactions or on the translation of monetary assets and
liabilities denominated in foreign currencies are recognised
in the statement of income and differences that qualify as net
investment hedges are recognised in other comprehensive
income. Translation differences on debt securities and other
monetary financial assets carried at fair value are included
under foreign exchange gains and losses. Translation differences
on non-monetary items such as equity instruments held for
trading are recognised as part of the fair value gains or losses.
181 Notes to the consolidated financial statements